Episode 6: Xerocon, iPhone X and cryptocurrencies (oh my)...

With the energy and excitement of Xerocon London still in the air, Rod and Gary are back with a new episode of the Rod and Gary Show. And with such a massive turnout this year in the UK and Melbourne, the two start with a stroll down memory lane – with stories about the first Xerocon, including a peek into what inspired the name.

Although much has changed from the first Xerocon, the idea of not making it about Xero has stayed the same. And clearly that still holds true today with a focus on the bigger ecosystem, impressive list of speakers and the excitement around Xero HQ.

Xero HQ – the open practice platform for accountants – brings the idea of openness, collaboration and connectivity to the forefront. This ultimately drives innovation and creates a push for a universal adoption of technology by small business.

Rod and Gary then switch gears to chat iPhone X and how they feel the new version compares. Is Apple’s focus on privacy a limitation or advantage for the tech company? The two have strong opinions that you won’t want to miss.

And when Rod admits he’s getting “Android curious,” you know there’s a shift in power. Ear buds that can translate language in real-time is just the tip of the data driven iceberg for Google. “They have much more opportunity to do magical things with software,” says Rod.

The two finish with a discussion on the current state of Bitcoin and Blockchain. Why doesn’t Rod think of Bitcoin as a sustainable currency? And what kind of problems does Gary think we haven’t invented yet for Blockchain to solve? Tune into the episode to find out!

Episode transcript

Hosts:
Rod Drury
Gary Turner

Gary: Hi Rod. We're at Xerocon at London. It's amazing.

Rod: It's .... I think it's the first time we've done The Rod and Gary Show in the same location. You're far better looking in real life.

Gary: You won't see ... and I won't see all the yawning that you do when I'm talking and boring everybody.

Rod: Yeah, I'm usually playing Minesweeper while you're talking.

Gary: So ... we've done Xerocon in London now for five years, this is the fifth one. So we started off with a couple hundred people and we have over 2,000 people here for two days in London, which ... And I was chatting with a whole bunch of people last night ... It's a prospect of, "Do you want to go to an accounting conference?" and usually people say, "Oh, I'm sorry to hear that," but actually, this is probably as far removed from a traditional accounting conference as you get. And lots of incredible innovation and app partners we're surrounded by. We have 65, 66 app solutions, obviously stuff that we're doing, some really outstanding thought leadership from some external speakers, and lots of forward-thinking accountants and bookkeepers, and ... Had a bit of a party last night, so it's been a great event.

Rod: Yeah, it's just amazing. When we first thought about doing our first Xerocon, we thought "Let's do a Xero Conference and at the time, comic cons were very popular so I said, "We'll call it Xerocon! And one day it'll be in multiple countries and over multiple days and it won't be about us, it'll be about all of the ecosystem partners and there'll be great international speakers!" so ... I just came back from Melbourne, we had 3,300 there, and to come to the UK and 2,000 accountants, it's just unreal, so it's pretty exciting. And what I'm so proud about is ... All of the add-on ecosystem partners, seeing how much they've been growing, and the capability of the solutions.

So a couple of really big highlights for me, and what we've been talking about, is the business strategy of what we've been doing. We know that in the accounting industry, it's about wedding accountants and making them more effective. So something we did 12 months ago, we started talking about our Xero HQ Open Practice Platform, and over the last year, we've been working with nine or ten best-of-breed accountant side applications. We sat down with them and said, "What are the common components? How do we have a common systems of record?" and got that architecture right, and then we've seen all the companies collaborating to have this integrated suite of tools.

And it's so powerful, working together as a team, not as a traditional vendor where you wanna own everything, where you actually work and you create opportunities for other companies. It means we can really respond to anything that happens in the market, and if we see any new innovations we can bring them in, like Boma, our new marketing tool, or if we see any gaps that we're not good at, we can go and find some partners to bring in, so, to me, that's one of the really exciting things, is making that open practice platform real and showing the power of having an open business where you really, actively use your ecosystem.

Gary: I think you're right ... One of the themes yesterday that really resonates with me is this idea that now we're 10 or 15 years into the real cloud world ... Hotmail was 1996, '97 and technically was what we'd call back then an application service provider but that ... The idea of running software on a browser's not new but it didn't really take hold until about 10, 12 years ago. And the first part of that journey was about just getting equity and parity with what people were using on their desktops, and I think that ... clearly was a necessary thing for us to do, but it also wasn't obvious to people what the opportunity for the cloud really was.

It looked like there was just a slightly more contemporary, more flexible, mobile alternative to desktop software. But I think what we've seen in the last couple of years is this openness of integration with banks and with pension providers here, with some of the other practice software vendors that we've been working with over the last couple of years, with obviously all of the ecosystem providers. And I think what that's actually doing is completely re-architecting the software industry on different rules, on a different blueprint, where openness and collaboration and connectivity are the real value that people get. It's no longer about these walled gardens of suites, and you have to buy one thing from, sorry, everything from one vendor.

And I think that is gonna have a significant impact on not just the way that technology works and the efficiency of that, but the number of people that still have yet to adopt proper systems of record is still low but it's growing quickly now. I think if we roll forwards 10 years, this openness will drive, if not complete and universal adoption of technology by business, then significantly many factors greater than we ever saw with desktop software.

Rod: Yeah, and I think that's where the UK is so exciting for us, being outside of the UK, because the really good regulation that's coming in, making tax digital, which over time will get all small businesses online, really for their own benefit, but also the revised Payment Services Directive, PSD2, which means that banks have to open up their API, so it's so fascinating talking to UK banks. They're not still on that debate about whether we should be open or not, they just have to get on with it and already, you can see the realization that it's gonna be great for their business and these amazing partnerships that they're doing, so I find it really exciting, working with some of the big UK financial institutions 'cause they're already on that way of, how do you build combined customer experiences across a whole lot of vendors, even large actors like themselves, and new small innovative players?

Gary: And I think, in a way, it's almost like the century, from a technology perspective, has just begun. For the ... We're now 2017, so for the first 10 or 15 years, it was still largely the old paradigm, it was 1980s architecture, 1990s architecture.

And it's taken us a while to become habituated with this new world of the web. And all of that means, just from a usefulness perspective, that security and fraud and everything else. And what's happening now, particularly around the areas of data, data privacy, and fraud, and particularly in finance, is that ... We were probably, collectively, really naïve 20 years ago about this thing called the internet. It was great, it was really useful and you could access things remotely, you could buy books off Amazon, but actually we now need to rework many of the rules and many of the ways we think about how we do things, how we handle data, taking security seriously ... We're seeing that in banks but ...

So I think it's almost how a fundamental rewiring of how we apply technology, both from a social perspective but also in business as well.

Rod: And I loved your ... The Bill Gates quote you used yesterday is one of my favorite ones. Which one was that?

Gary: So, "We always overestimate the amount of change we'll see in two years and underestimate change over a 10-year timeline."

Rod: Yeah, just brilliant, isn't it?

Gary: Yep.

Rod: Cool. So Xerocon's going well. What else is spinning your wheels? We've had a ... Since we last chatted, we've seen the new iPhone X launch. You're buying one, I guess?

Gary: Probably ... Do you know what, I feel like, professionally, as a member of the International Association of Nerds, I kinda hafta buy one, it's in the charter. I just have to do that. But I'm not ... I don't really find I'm counting down the days, I'm not excited about it. I kinda feel, "Well, I'll get one, but" ...

Previous releases ... I remember the big release of the iPhone 4, that was a really exciting step forwards. I think the iPhone 8 looks just like ... And they have to do it 'cause they're a company and lots of people will buy them and therefore Apple have an obligation to sell the iPhone 8 but it's really just an iPhone 7 S. And it's the end of the line for that generation, that family tree of iteration on that black tria ... that black... Maybe they should've done a triangle ... The black rectangle. Maybe I've just called it, maybe triangular phones are the future.

But I have some sympathy, not much coz they make lots of money, but some sympathy for Apple because they just can't continue ... How much more improvement can they bring to that original iPhone concept? They had to move it onto something different, and so they're in this difficult phase where they're ... They now have something like 7 or 8 different iPhones, which is really un-Apple. You remember they've got from the 5 SE, they've got the 6 S still, they've got the 7, they've got two versions of them, two versions of the 8, and now the X. And so there are more phones than ever, which just seems really messy from Apple's perspective but they'll sell them anyway, so they might as well have them.

And I'm ... Do you know what, I've got a 7 Plus and I'm probably gonna get the new one but I can see me skipping a generation and wait for the X2, or whatever they call it, next year.

Rod: Well, while we've been doing Xerocon, overnight the Google hardware keynote came out. They had some interesting stuff, they had their new version of EarPods. They had a wire connecting them too, but because they have all the ... They've taken a real combi ... a different approach to machine learning than Apple has over the last five years. I think Apple really got this wrong. Apple became all about privacy, which is obviously an important thing, but Google went the other way and they said, "Look, if you trust us with your data, we'll do some magical things." So these new earbuds they have actually do real-time translation of people that you're talking to, which is pretty amazing, and I think one of the quotes I picked out last night, they do see the phone as just this black glass rectangle now, and they are doing ... They have much more opportunity to do magical things with software.

So what they're saying is that cameras are even ... Their photos are even better than the iPhone 8 'cause they have less sensors, but they're able to use software and machine learning on the phone to do some cool things.

So I think we're seeing this kind of tactical difference, and I'm ... I always get Android-curious every couple of years. The only thing that's holding me back is photos. I've already moved music to Spotify, and I've got most of my things ... I miss iMessage, I like iMessage. I don't understand why Apple didn't do an Android version of iMessage and own that, 'cause it's very easy ... The pain would be moving the family to WhatsApp, but again, that'd be just an hour and we'd do that. But ... It's fascinating that these big companies though, still don't really ... They aren't really user-centric, like if I was Google, I would do my user surveys and work out very quickly that probably photos is the scariest thing to move.

For me, I've got 10 years' of digital photos that are all in albums, and I wanna know how it works, and ... How I understand it works at the moment is, you've gotta somehow tell iPhoto to pull all my photos down locally, that's gonna take three days, then get their uploader and upload those, which is gonna take another three days, and then ... I don't know if albums move across, so I'm nervous about changing and if they did that, all the friction would be gone.

Gary: Do you know what's interesting though, is that there's been so much ... Everybody's talking about what Google are doing, what Facebook is doing, what Apple is doing ... and nobody's really thinking about Microsoft lately, and what's happening is that, since the attention has come off Microsoft, and Nadella has been in ... Sayta Nadella has been CEO for three years now, and obviously he's taken a while to pick up where Steve Ballmer left off, and reconfigure that.

But almost quietly, in the background, while nobody has been looking, Microsoft has done an amazing transformation job. Their market cap's ridiculous compared with what it was three or four years ago, which is only one measure of success, but every time I speak to somebody from Microsoft, it feels like a different company. I left Microsoft to get onboard with Xero eight-and-a-bit years ago, and so I know Microsoft quite well, as an ex-employee. I think it's a very different organization to what it was 10 years ago, and possibly even five years ago.

And I find that really encouraging, 'cause I think Apple and Google and Facebook, and that whole ... that whole cartel, almost, of innovation needs another challenger and Microsoft's voice has been absent, they've been absent on mobile, disastrously. They've been caught napping on operating system devel ... deployment and development, and I have ... a bit of an outside bet that a year from now we might be talking about Microsoft being back at the table with some really innovative thinking around machine learning and AI because the spotlight's been off them and whilst that's been happening, I think Nadella has done an incredible job of quietly re-engineering the whole company.

Rod: Yeah, and some of the coolest hardware innovation we've seen has come from Microsoft in the last year, but I think ... I'm certainly still burnt from my experiences 10 years ago ... Probably gotta go a little bit further now, but I have to tell you, I'm pretty disappointed with what I'm seeing from Apple. The only thing that I'm excited about, hardware-wise, is the new black iMac, but it's not gonna be touchscreen, they still don't have a monitor, I still can't connect to 12" MacBook Pro, to any of their monitors so ... It's an interesting world, and I'm glad you brought up the Microsoft stuff, 'cause we know that it's competition that fixes things like this.

Hey, the other one I really wanted to catch up, 'cause a lot of people talk about it, is Bitcoin and Blockchain. I've been kinda down on it, and ... a lot of very experienced and senior people I've talked about ... have been talking about both things, so I wanted to go through my views and see what your thoughts.

On Bitcoin, we're seeing this really interesting upside based on scarcity and so the price is going up ... So, a lot of very wealthy people I knew, wealthy tech people, when Bitcoin started to be talked about, they just put a little bit of money in it, and they've made a fortune through it. But I still don't think that cryptocurrencies really are something that are gonna gain a whole lotta traction and that's because we've spent a lotta time with government organizations, and our view is even moreso now, with the surveillance culture, that if ... that governments are not gonna allow the deregulation of currency, so I think Bitcoin's tied up with that idea around all those really nice feelings about the open internet and all of those things, but commercially and from a government point of view, if anything gets to scale, I think it'll be ... I think it'll end up closing. So I don't really see, at the Bitcoin level, a huge upside, but I get how people in the short term are making money out of it.

But Blockchains, I've done a lot more thinking about that, 'cause a lot of people I respect are all into it. And ... my thoughts crystallize with an a16z podcast. So we're a pretty big actor now, we have a lot of centralized data, and what I've found is, if you're a centralized actor, you're far more motivated to keep things under your control, and a lot of networks actually require a strong actor to make things happen. So, as we're ... have a lot of data held centrally, it's far easier for us to drive centralized-type applications.

And what seems to be the perfect application for Blockchain is where you have equivalency of networks. You've got multiple strong actors where there's no one central player that's driving things forward. So where I am seeing a lot of opportunity is ... in financial transactions ... settlement-type applications. And we've been looking at a few security things where banks may not want to give ... cede control of their data, but be able to work at a peer level with a bunch of other banks, and there's some really fertile ground. So I think we've now finally found a few really good applications we can start experimenting with Blockchain.

And ... Yeah, I think the key thing has gotta be this equivalency of network power, so multiple strong actors are motivated to work together. If you have a single strong act to model, that tends to suit centralized apps.

Gary: I think so ... It's easy to think of Blockchain and distributed ledger technology, as this solution looking for a problem, and that's often in technological history been a bit of a putdown. Not really necessary, nobody's asking for it, why would you do that?

I think I've flipped my thinking on it, and I think that's actually what it is. We haven't invented the problems yet that Blockchain is gonna solve because the world is still largely not digital. The more we connect systems, networks, communities, customers, organizations together in a digital way, I think there'll be a growing abundance of problems that Blockchain and modern technologies like that, distributed ledger technologies, will actually fix. And so ... Therefore it is a solution looking for a problem, we just haven't invented the problems yet. But I think we will do, and the bigger we get into this ... And it's like anything else, we start off building browser software, you think "Well, it's like a desktop bat, but it runs on a web browser and that's convenient, and then 10 yrs down the line you go, "It's so much bigger than that."

So I think the more we get into this new world that we're building out of a lot of the stuff we spoke about earlier, and re-architecting the way that data flows and the way that contracts are done and the way that everything's done. I think, actually, technology, whether it's cryptocurrency or Blockchain or associated distributed ledger technologies, will become ... really important ...

So I think it is a technology looking ... a solution looking for a problem, we just haven't invented the problems yet, but I think we will.

Rod: Yeah, and I think we're just starting to get a peek of it with some of the security stuff that we're playing with at the moment.

Hey, forgot to mention Watch 3, a cellular watch, what do you think of that?

Gary: Well I've got the Watch 2 and ... I'm not rushing out to buy one with ... a cellular radio in it anytime soon. I thought it was really interesting ... We were having a conversation about it in the office when the launch video was up and ... They actually ... On the Apple keynote, they cut to an Apple employee and she was paddle boarding on a lake, and you could hear really clearly ... And you could hear what she was saying and everything else, and she was speaking and having this call on her wrist-

Rod: You wonder if they had to be on a lake.

Gary: Well that's the point we made. So, we said "How many ... " So they must have started with a really long list of activities that they could be doing that meant your arm was stationary ... So swimming wouldn't work ... Sea wouldn't work 'cause it might be too windy and the noise of the waves breaking ... We identified that it's the ideal solution for people that paddle board on lakes, but actually, that's a pretty narrow use case.

Rod: I would say it's super interesting 'cause we're in London at the moment, and I brought my three kids up and my nine-year-old, I really didn't want to have a phone, but I wanted to track her, just in case ... The horrible scenario would be you're on the Tube and it's a bit crowded and she's outside the door and it closes, so I kinda like the scenario of the kid phone, where you have the emergency locator beacon, you can text them, but I think it's still very much a tethered device and the next generation may be untethered, which would be pretty cool.

Gary: Yeah, so I'm happy with my Series 2 'cause I ... never go anywhere, maybe the sauna or ... for swimming at the gym or something and I'll leave my phone in the locker, but I think I've got different priorities if I need to be reachable on phone calls while I'm swimming or-

Rod: I'm still struggling, although I do love my nice watches, and I wish they'd do a thing that went on the back of the watch band, which is actually a far more ... The back of the wrist is a far more natural thing, where you can have a little side glance to see what's going on, on your wrist. I think that's the ... Either answer is that or you wear two watches, which I think would be weird.

Gary: I think I came up with that idea, I think I called it the "flip strap" and you have one on either side, but-

Rod: Well, you did invent the internet, so-

Gary: And that, yeah.

Rod: Very good.

Hey, great to see you in person, and it's been an awesome show. Congratulations on what you guys have achieved in the UK, it's just unreal.